U.S. to Become New Center of Low-cost Manufacturing?

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In early 2010 I wrote a post about how factors including rising wages, quality issues and cost increases in both raw materials and shipping were prompting some American companies to move manufacturing operations from Asia back to the U.S. It turns out American companies are not the only ones to see the U.S. as a good alternative to Asia.


Companies from European countries like Germany and Sweden are locating manufacturing facilities in the U.S. where labor costs might be higher than in China but are certainly lower than in Europe. Yet this investment isn't entirely welcome, even during the current tough U.S. economic conditions, writes Harold Meyerson in an opinion piece for the Los Angeles Times. The title says it all: "Where Europe Comes to Slum."


It's no coincidence that companies like IKEA, BMW and Siemens are locating their plants in right-to-work states, primarily in the Southern U.S. Meyerson writes:

... In their eyes, we're becoming the new China. Our labor costs may be a little higher, but we offer stronger intellectual property protections and far fewer strikes than our unruly Chinese comrades.

He cites a recent Boston Consulting Group report that says the cost differential between manufacturing in China and the U.S. will shrink to insignificance by 2015, thanks to rising wages and comparably low levels of productivity in China. The U.S. will "become[s] one of the cheapest locations for manufacturing in the developed world," according to the report.


Meyerson contrasts the different approaches to employee relations these companies take in their home countries vs. the U.S., citing a report by Human Rights Watch. He struck a similar tone in an earlier opinion piece for The Washington Post. In that piece, he notes the BCG study compared labor costs in China's Yangtze River Delta and Mississippi, a state "that ranks 49th or 50th in virtually every measure of U.S. living standards" and wonders if "Mississippi [is] the new normal for an America that's competitive in the global marketplace?"


Meyerson mentions a somewhat more hopeful example in the Post piece in U.S. Steel, which he says enjoys good relations with the United Steelworkers union. The union has made some concessions in recent years, he writes, but "conditions for workers there haven't descended to Mississippi norms."


It's worth noting that European companies aren't the only ones moving manufacturing facilities to non-union Southern states. NCR Corporation in 2009 relocated its headquarters from Dayton, Ohio to Duluth, Ga., in a move its CEO said would save "tens of millions of dollars" over the next decade.


Aerospace giant Boeing has expanded facilities in South Carolina while scaling back in Washington. That expansion prompted the National Labor Relations Board to accuse Boeing of breaking federal labor laws.

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Add Comment      Leave a comment on this blog post
May 27, 2011 3:54 PM Jim Jim  says:

America grew up on a free market based economy. One of the basic precepts was the right of every American to work without bing harrassed by the Business owners and/or any Union organization. If we are to grow our economy again we need to embrace these precepts again!


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